Conflict of interest company law case study

Three Conflict Case Studies

They alone would determine the guest list and the activities. In fact, this select group would oversee everything concerning the party: These people would in fact do everything except pay for the party. That onerous obligation would be for the public indirectly and the government of the country hosting the party.

So far so good.

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Then, for good measure, imagine that this party is accepted as the embodiment of all that is good and just in the world, and thus sponsors worldwide jump at the opportunity to be associated with it. Furthermore, host governments see the party as prestigious and profitable, therefore compete with each other, and even attempt to bribe our organising group of individuals, just for the right to host the party even though it is clear that the obligation to pay for the party is theirs and theirs alone.

Were you to suggest this concept in these terms you might be dismissed as a fool.

Here are three interesting conflict of interest case studies from Tuesday's news. It is here that the comparison between the IOC and the modern corporation becomes difficult.

It has been assumed throughout that the corporation is the appropriate model.

Further observations concerning the corporate governance obligations of corporations are made below.

The doping issue is a substantive problem that needs to be tackled by the various governing bodies controlling organised sporting activity. It has been suggested that the IOC needs to alter the method by which individuals become members.

The last year has seen international sport beset by controversy. Legal wrangling over positive drug test results involving elite athletes has affected many premier events: Concern over widespread drug use threatens the integrity of sport. At the same time, questions have been asked about the competence of current administrators and administrative structures to deal with the drug problem.

This last year, the International Olympic Committee convened a World Conference on Doping in Sport in an effort to standardise test protocol and sanctions, as well as establish an internationally respected, autonomous, independent anti-doping authority. The doping issue is a substantive problem that needs to be tackled by the various governing bodies controlling organised sporting activity.

However, the most high profile international effort to tackle this problem, the World Conference, was overshadowed by concern about the management of international sport and, specifically, the competence of the IOC to organise the fight against doping.

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In the rash of public comment that has continued unabated since last year, what has emerged is serious concern over the integrity of the IOC. To be sure, the IOC itself has acted, by conducting internal investigations into the conduct of some of its members, as well as establishing an ethics commission to promulgate rules of conduct for members. Furthermore, how might reform, if advisable, be achieved.

Is the IOC best regarded as a private organisation, best regulated by the behaviour of market forces, or is there some public interest which mandates the enforcement of regulatory norms on this body, and what ought those norms be? In this brief article, I explore the nature of the issues confronting the governance of international sporting activity, using the IOC as a case study.

My starting proposition is that the IOC is essentially a private organisation, albeit one that manages to secure access directly and indirectly to substantial public moneys. Any person or organisation belonging in any capacity whatsoever to the Olympic Movement is bound by the provisions of the Olympic Charter and shall abide by the decisions of the IOC.

According to the Olympic Charter: Olympism is a philosophy of life, exalting and combining in a balanced whole the qualities of body, will and mind. Blending sport with culture and education, Olympism seeks to create a way of life based on the joy found in effort, the educational value of good example and respect for universal fundamental ethical principles.

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The goal of Olympism is to place everywhere sport at the service of the harmonious development of man, with a view to encouraging the establishment of a peaceful society concerned with the preservation of human dignity. To this effect, the Olympic Conflict of interest company law case study engages, alone or in cooperation with other organisations and within the limits of its means, in actions to promote peace. Under the supreme authority of the IOC, the Olympic Movement encompasses organisations, athletes and other persons who agree to be guided by the Olympic Charter.

The organisation and management of sport must be controlled by the independent sport organisations recognised as such. The goal of the Olympic Movement is to contribute to building a peaceful and better world by educating youth through sport practised without discrimination of any kind and in the Olympic spirit, which requires mutual understanding with a spirit of friendship, solidarity and fair play. One could debate such conclusions endlessly, but of more interest is the question of to what extent can such an association be challenged or controlled through any form of legal mechanism.

And furthermore, is such use of the law appropriate? Ultimately, international sporting federations are immune from direct state intervention. This of course, is not true of national sporting bodies, which are subject to the law of the jurisdiction in which they are situated.

In addition, those same national bodies are subject to state pressure and direct control to the extent that they or their members are in receipt of state funds. Even a national sporting federation is under no such obligation, save to the extent that it may choose to be incorporated under State or Commonwealth legislation, which may impose minimal governance requirements. Indeed, the only obligation imposed on such bodies is that of reporting.

There is no simple universal formula for good governance. Companies vary so greatly in size, complexity, ownership structure and other characteristics that what is ideal in some cases may be inappropriate in others.

Moreover, as companies and industries change, ways of governing may need to adapt. However, it is essential that all involved, and particularly boards of directors, should adopt the practices best suited to the good governance of their organisations in their particular circumstances. The obvious analogue is the private corporation.

Like the IOC, the corporation has legal personality and acts as a framework around which activity is organised.

However the analogy soon breaks down;

It might be helpful to them if there was a public discussion with the airport attorney about what she did, choices she faced, and decisions she made;

Moreover, as companies and industries change, ways of governing may need to adapt;

See Olympic Charter, Rule 23, para 6.

The IOC is specifically given this legal status by legislation in Switzerland, where it is domiciled. There are many varieties of corporation and the conflict of interest company law case study is rapidly changing to recognise the increasing role many non-traditional stakeholders ought play in corporate governance. What was once a simple matter of recognising that corporations ought be governed by representatives of their owners, the shareholders, has become increasingly more complex.

Therefore, even though we can say with complete confidence that shareholders are the owners of the corporation, that does not resolve all questions of appropriate governance structure. In an article of this nature, all one can hope to do is raise questions and place them within an appropriate context, in an effort to refine the nature of public debate. What follows is intended to serve as a trigger for further debate on the question of IOC reform and is also intended to offer some legal structure around which that debate could intelligently focus.

However, the IOC is not subject to any domestic corporate legislation in Switzerland. It is free to adopt its own constitution and its own structure. This it has done in the form of the Olympic Charter.

The Olympic Charter is a curious document, which serves a multitude of purposes. For one to understand the Charter, one must appreciate the desire of the founders of modern Olympism to preserve their domain, that of international sport, from the interference of national governments. It is for this reason that the IOC has attempted to constitute itself as the supreme authority in matters of international sport, particularly concerning the Olympic Movement.

As we shall see below, it is also for this reason that members of the IOC are clearly stated to be representatives of the IOC in their countries of origin, rather than representative of those countries to the IOC. However the analogy soon breaks down. Certainly the modern business corporation is a far more complex animal than the IOC. In the case of corporations incorporated under national general incorporation legislation, [16] such legislation typically deals with matters such as: By contrast the IOC Charter deals with few, if any, of these issues.

It is defined as: Blending sport with culture and education, Olympism seeks to create a way of life based on the joy found in effort, the educational value of good example and respect for universal ethical principles. While this may be so, the more difficult question from a legal perspective is the determination of the mechanism for such accountability.

This we shall explore below. The Charter does mandate that the OCOG shall have the status of a legal person, with an executive committee including: Rule 40 of the Olympic Charter provides: The IOC shall have no financial responsibility whatsoever in respect thereof. Thus, in summary, the IOC conflict of interest company law case study supreme authority concerning the Olympic Movement, which includes absolute authority concerning the staging of the Olympic Games and management of Olympic intellectual property.

Furthermore, the IOC has ensured that commercial arrangements involving the Games leave it in a position of minimal or no risk.

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These matters are dealt with in Rules 19 to 28 of the Olympic Charter. It is here that the comparison between the IOC and the modern corporation becomes difficult. Let us start with the question of membership. The members of a corporation are, quite simply those who become members by subscription, transfer or transmission.

For a corporation to come into existence, there must be an incorporator or incorporators. The Charter does provide that there cannot be more than one member elected in a country, unless that country has held either a Summer or Winter Olympic Games, in which case there may be a second member elected.

In addition, the President of the IOC may propose the election of up to ten additional members without distinction of nationality or domicile. It has been suggested that the IOC needs to alter the method by which individuals become members. At present, members are elected by the IOC. In practice, such election follows nomination by the President. There is no nomination committee, nor is there any requirement beyond that of domicile and linguistic ability.

The latter group, it is suggested, might be elected from a list produced by a nominating committee. It is interesting to contrast such suggestions with the corporate model. As noted above, there has been increased recognition of non-traditional stakeholders in modern corporate law.

The members of a corporation are, quite simply those who become members by subscription, transfer or transmission;

In the final analysis, any reform of the IOC will need to be voluntary.

However, despite such recognition, corporate law has stopped far short of obliging corporations to afford their stakeholders any form of managerial representation. Indeed, the Olympic Charter does not disappoint. Rule 20, paragraph 2 contains a list of obligations of IOC members, largely to do with participation in IOC Sessions the equivalent of the company general meeting and representation of the IOC in his or her home country.

IOC members are subject to some rudimentary conflict of interest rules. The Olympic Charter provides: Members of the IOC may not accept from governments, organisations, or other legal entities or natural persons, any conflict of interest company law case study liable to bind them or interfere with the freedom of their action and vote. However, since the early 1980s the nature of the Olympic Movement has changed drastically. In the first place, the IOC has capitalised on the immense commercial value of the Olympic Games, most notably in the form of exploitation of the Olympic trademark and sale of broadcast rights to the Games.

As a result, the IOC controls significant financial resources and assets of tremendous commercial value. Furthermore, it must be recognised that this commercial value is a result of increased and widespread interest in the Games themselves, as well as the workings of the IOC, thus resulting in increased scrutiny.

Increasing interest in sport at a national level, worldwide, has led to increased public expenditure on sport at both the grassroots and elite level, thus leading to growing governmental interest in the Olympic Games, whether as a vehicle for securing international recognition and prestige, through superior athletic performance, or as a vehicle for promoting participation in sport. This is exemplified by the fact that at the recent World Conference on Doping in Sport, over 30 Ministers for Sport addressed the Conference.

Finally, increased professionalism amongst athletes, and the abandonment of the requirement of amateurism for eligibility for the Olympic Games makes the position of the athlete somewhat analogous to the corporate employee. Thus, it is arguable that the success of the Games derives from the efforts of the athletes, much in the same way that it is argued that corporate success derives from the efforts of the worker.

Membership is by invitation. The IOC is itself effectively immune from regulation.